Not every negative economic event is
insurable. For risk pooling to be effective, the risk should be unforeseen and
infrequent. If a negative event can be predicted in a certain case, it's not a
risk, but certainty -- and certainties are not insurable (with the possible
exception of death, which is insurable because its timing is uncertain).
Furthermore, if a risk is too frequent, it cannot meaningfully be transferred
to an insurance company, since the insurance company would only pass on the
cost of the negative occurrence to the pool of insureds, along with their
expenses and profits. If nearly everyone in a risk pool is filing a claim, then
they are likely better off not attempting to pool their risks at all but setting
aside sufficient reserves to pay for them themselves.
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